Edwin Agung Wibowo

Dosen Fakultas Ekonomi Universitas Riau Kepulauan

Abstract

This study defines views of outsourcing from Finland to India.  The conventional benefits and disadvantages of outsourcing are reviewed through the multinational Company Nokia moving its manufacturing to India.   Particular aim is to address the cultural dimensions relating to outsourcing.  Hofstede’s cultural dimensions are used to address this issue, where his study results for Finland and India are used for comparison.  In addition, the study draws ethical issues into consideration when a company decides upon outsourcing.  Finally, successful strategy on cultural basis is constructed to draw attention on how to return on investment calculations. In whole, the discussion analyses how culture affects outsourcing, the implications and solutions.

Keywords : Outsourcing, labour market, sevices, environment

Case Study: Outsourcing in India

As the world becomes more integrated, global competition for lower-priced products and services become the main focus for many multinational Companies (MNCs). The fierce competition forces many companies to locate their operations where it can be most efficiently conducted[i] and for many the answer lies in outsourcing.  Outsourcing is the strategy in which the company makes the agreement with another company to do particular jobs concerning products and services[ii]^,[iii]. Therefore, outsourcing provides the benefits by creating the opportunities to achieve economies of scale which then enables the company to lower the costs and prices of the products /services.

Recently, India has gained popularity for outsourcing in service sector, but it is also emerging as a destination for designing and production.  Nokia has outsourced parts of its mobile phone manufacturing as well as research and development to India[iv]. India has a distinctive advantage because of their good supply of educated, highly skilled and cheap labour[v]. Another factor that drives many MNCs to select India is because of its good infrastructure and enabling government policies.